From many accounts, Americans have renewed a tradition — holiday shopping.
Whether it was for gifts or to shop for themselves, consumers got off their couches and scurried to the stores over Thanksgiving weekend, in some cases even putting their smartphones down momentarily to purchase coats, beauty products, cookware, 4K TVs and Alexa and Echo voice-controlled digital assistants. Beauty companies including Estée Lauder, Sephora and Ulta joined the promotional frenzy like never before, creating an added inducement to spend.
“People want to get out and do something and they are definitely spending, whether online or at bricks-and-mortar,” said Ami Ziff, director of national retail for Time Equities, a real estate firm with a portfolio that includes 105 retail properties in the U.S., primarily value-oriented shopping centers, in many places getting re-tenanted with healthier retailers. “Retailers in malls are reporting flat to 2 percent increases but traffic is up 6 to 7 percent and online sales 20 percent ahead.” That brings total sales “up somewhere in the 3 to 4 percent range, depending on the location,” Ziff said.
Off-pricers and restaurants fared best in the past few days, including T.J. Maxx, Five Below and Dollar Tree. Others appearing to do well are Best Buy, Williams Sonoma, American Eagle and its Aerie teen division, according to Ziff.
“With the [good] weather, people were out shopping and our numbers were above plan,” said Lou Amendola, chief merchandising officer at Brooks Brothers. For Black Friday, “Traffic was steady midday through early afternoon. And there seemed to be an increase in traffic in the stores and a little less online. Maybe the weather encouraged people to get out.”
Brooks Brothers was “much less promotional” than a year ago, he added. “That was the plan. We had one shirt promotion but nothing on sweaters or outerwear. Business has been exceeding plan so there’s no excess inventory to move.”
He said shoppers are responding to price-value relationships on items and willing to pay for attributes such as washable sweaters and wind-repellent outerwear. Consequently, bestsellers during the weekend were washable merino wool sweaters, performance nylon outerwear and lightweight puffer jackets in the youth-oriented Red Fleece collection. Men’s not-too-heavy outerwear and quilted vests, and women’s “timeless classics” such as twin sets, cashmere sweaters and camel hair coats and blazers and Red Fleece dresses and dresses designed by Zac Posen are bestsellers. Amendola is optimistic Brooks Brothers will meet its “conservative” plan for the season.
“We’re definitely up, but our fall has been good so we’re continuing that trend,” said Ken Giddon, president of Rothmans, which operates three men’s stores in New York City and the suburbs. “Fresh” outerwear and sportswear, pop-up areas, service and events “give people a reason to come into the stores,” he said. A Vineyard Vines pop-up has been popular with the younger set. “Every kid from 14 to 22 who walks into that store is wearing Vineyard Vines,” Giddon said. Top-selling outerwear includes Corneliani, Save the Duck, Mackage, Billy Reid and Rodd & Gunn.
Wal-Mart on Sunday ran an online ad, “Wal-Mart Black Friday: Really Big Deals Extended.” The ad continued, “Hurry! Get really big deals while they last,” which is ironic, considering many products didn’t last and were in fact, out of stock before Black Friday even started.
“Black Friday is about offering our customers some of the best prices on the hottest items,” the retailer said in a statement. “Even with significant inventory, hot items on Black Friday sell quickly online. Great products and prices are still available on the site today and will be throughout the rest of the season.” Wal-Mart’s Cyber Monday event started at midnight.
TOO SOON TO DECLARE VICTORY
“It was a good start to the holiday season but it’s a long game,” said one senior-level department store executive, sounding a cautionary note. “I’m pleased with the general level of business across multiple categories. There definitely seems to be an interest in getting out there and spending a few dollars.”
After Black Friday, “The malls were still crowded throughout the weekend. Saturday’s traffic was high and people are still getting out today in the right spirit,” said David Bassuk, global coleader of the retail practice, AlixPartners LLP, on Sunday. “It’s not only a sign of a good season, but also recognition that Black Friday continues to spread across multiple days and into Cyber Monday. It’s a four or five-day expedition rather than a one-day sprint. A lot of retailers promoted on Saturday and Sunday for things coming on Monday.”
Bassuk and his team of 50 visited malls across the country, including the Short Hills, Livingston and Freehold Raceway malls in New Jersey, which he said were all crowded.
Still, it’s not like bricks-and-mortar retailers are out of the woods. They’re still overstored, overspaced at several sites, stuck with big name brands losing relevance in certain cases, and losing share to online retailers who have the edge attracting younger customers and providing ease and convenience.
Moreover, “Consumers don’t feel rushed to get holiday deals,” Bassuk said. “There are four more weekends before Christmas. They can wait, putting retailers in a state of concern all the way to the 23rd or 24th” of December. “The consumer is in a good pole position right now.”
“Out West the weather was so warm, the outlets were packed,” said Craig Johnson, president of Customer Growth Partners. “Department stores, all things considered, did pretty well.”
However, after a strong Black Friday, department stores are “most vulnerable to the dreaded early December lull. They may yet have a decent season, though it’s too early to tell. Maybe we’re a third of the way through the season, but there is a materially different tone to the business from recent years, more like 2004, 2005, 2006, than recent years. Real disposable income is up after being in the dumpster for eight to ten years. There is a wealth effect. The stock market has been up. And thirdly, unemployment claims are at their lowest level since 1974. That means from a psychological point of view, people feel better about things.”
Trade groups and retail analysts have predicted 2017 holiday sales to come in at 3 to 4 percent above last year’s, though retail executives remain reluctant to forecast the remainder of the season despite the good beginning.
Tom McGee, the president and chief executive officer of the International Council of Shopping Centers, was less reticent, stating, “Thanksgiving weekend is a great indicator for what will be a holiday season full of spending, as we are seeing a very positive consumer sentiment and willingness to spend. Shopping centers across the country should feel very optimistic about the season ahead. While the shopping season is longer this year, it’s not coming at the expense of the most popular shopping day of the year.”
On Sunday afternoon, the ICSC reported that throughout the weekend, more than 145 million adults visited malls and shopping centers and spent an estimated $377.50 on average. Food, dining and entertainment benefited from the visits, with adults spending $78.70 on average in those areas. Over the past week, retailers often offered 40 to 50 percent off a wide range of merchandise. The discounts will get deeper as December progresses and retailers will layer on bounce backs and other inducements to draw repeat traffic.
Stephen Lebovitz, ceo of Chattanooga, Tenn.-based CBL Properties, which has a portfolio of 70 malls and more than 40 strip centers in mostly secondary markets, said Black Friday was very strong due to an early morning boost from promotions and giveaways, and then a small lull set in. Still, he believes stores beat their plans and department stores had good results, including J.C. Penney, Belk and Dillard’s. Dick’s, Victoria’s Secret, Bath & Body Works, Pink, White House, Sephora and Ulta were also strong, he added.
Saturday morning seemed “on the quiet side, but by afternoon traffic picked up except in towns and cities where a college football game was being played. Everybody seemed really satisfied with the holiday and with yesterday too. Some colder weather will help. St. Louis was in the 60s,” Lebovitz said. “There’s definitely a long time to go, though I don’t see anything changing that would stop the momentum. There’s a good calendar. I’m expecting the two weekends before the holiday to get really jammed.”
Planalytics, the weather forecasting firm that works with retailers to help them plan their business, issued a statement that rainfall was the least since 2013, and snowfall was the lowest in over 20 years, supporting foot traffic in shopping centers, malls and restaurants. The heaviest amounts of rain were focused in the Pacific Northwest and portions of the Southeast, and cold temperatures hit much of the East, boosting demand for seasonal categories.
“While nationally it was the warmest Black Friday weekend since 2001, regional trends prevailed. The warmest temperatures to normal and last year were focused in the Mountain and Pacific regions, both of which had their warmest Thanksgiving Day in over 50 years and their warmest Black Friday weekend in over 20 years. Record-high temperatures were widespread throughout the West. Conversely, the Mid-Atlantic and South Atlantic regions each had their coldest Thanksgiving Day and Black Friday weekend since 2014,” the firm said.
In California, shoppers were hit with warm weather that crept as high as the 90s in some parts on Friday before falling down to the 70s and 80s the rest of the weekend.
South Coast Plaza by late Friday was wall-to-wall traffic. The shopping center confirmed traffic was up overall and on track to hit 300,000 for the weekend.
“The mood was a little more somber last year and there were things going on in our world election-wise that impacted the country,” said South Coast Plaza executive director of marketing Debra Gunn Downing. “This year, the fact that we’re at high employment levels, there’s a great deal of consumer confidence and the stock market is at an all-time high, feels really positive for retail and we’re sensing that.”
Velvet and over-the-knee boots are bringing customers in, as are the shopping center’s collaborations with brands such as Gucci, Brunello Cucinelli, Versace, Miu Miu, Marni and Charlotte Olympia in celebration of South Coast’s 50th anniversary. “People want something special and new,” said Gunn Downing.
Taubman Centers’ Beverly Center, which is undergoing a $500 million makeover, wooed people in despite the construction. The project, now in its third and final year, may have impacted shoppers “a little bit,” said Beverly Center marketing and sponsorship director Susan Vance, but work completed on the exterior has helped drive traffic over the past month. Vance said the center is on track to be in line with last year’s performance.
“Black Friday will forever be the marker of holiday but, personally, for Beverly Center…we really have consistent traffic throughout the year,” Vance said. “So our Black Friday is when we do see maybe a bump in a lot of the anchor traffic or these [other] bigger stores.”
Flash-sales site Zulily kept a constant flow of new product on its site. Black Friday saw limited-time “Flash Finds” offers across categories and a 15 percent off discount for orders of at least $75, while Saturday and Sunday shoppers received free shipping. “We are continuing to see Black Friday’s positive momentum in sales carry throughout the weekend, and into Cyber Monday,” Claire Magruder, women’s creative art manager, said Sunday morning. “Since we have baked into our business model launching a new site every day, our customers have created a daily habit to come back each morning at 6 a.m. and see what new products and brands she can discover, and this routine certainly continued over Black Friday weekend.”
Fast movers included Spanx shapers, Steve Madden sherpa jackets, a faux fur-trim coat from Canada Weather Gear, footwear from Ugg and Muk Luks, along with sweaters, leggings, tunics and denim also proving popular throughout the weekend.
“It’s the big brand names that she’s noticing,” Magruder said. “That’s a little different from last year. Last year she was going more for basic items. We’re seeing denim is a driver this year. We have premium brands like Not Your Daughter’s Jeans and Seven For All Mankind.”
BEAUTY’S PROMOTIONAL PLUNGE
One big change was with beauty retailers. “There’s just so much more discounting,” said Larissa Jensen, beauty analyst for The NPD Group. “We used to be immune. Sales would be all over the store with the exception of beauty, and that’s not really the case anymore — it’s a totally different world.”
“U.S. stores have had to get creative to battle e-commerce by jumping into new product categories as well as offering some fantastic sampling experiences and interactive workshops,” said Jill Standish, senior managing director of retail at Accenture.
An influx of newcomers into the $46 billion beauty category, including 7-Eleven, Anthropologie and T.J. Maxx, has increased competition and triggered beauty discounting, according to Johnson. “Demand has risen for cosmetics but the supply has also risen.”
At Cos Bar, there were “no surprises” on Black Friday, said ceo David Olsen. High-end skin care, including La Prairie, Sisley, Tata Harper, Natura Bissé and La Mer, sold well, he noted. The retailer saw a 15 percent increase in traffic over its monthly average and posted double-digit revenue comps year-over-year for last week, he said.
At Sephora, promotions included First Aid Beauty Ultra Repair Cream for $15 (valued at $42) and Becca Wake Up Call Kit for $15 (valued at $23). Bluemercury had 20 percent off in-store with purchases of $200 and ramped up gift-with-purchases, such as a 20-piece surprise beauty bag with any online purchase of $75.
Black Friday sales were also robust on beauty web sites. MAC, Clinique and Bobbi Brown offered 25 percent off; Lancôme and Giorgio Armani Beauty had 20 percent off sales; Glossier offered 20 percent off, and Kylie Cosmetics offered 40 percent off Lip Kits and 30 percent off palettes. For the Estée Lauder Cos. brands, e-commerce sales were up more than 90 percent year-over-year from last year, according to the company, with a 74 percent uptick in mobile sales.
IMPENDING SHOPPING LULL
Despite the momentum so far, with inventories generally in good shape and strong consumer confidence, retailers do have serious concerns — among them profitability, amid sustained discounting and increased shipping costs. There’s also the “dreaded” lull after Cyber Monday lasting through mid-December, and there are challenges making sure the online presence and online promotions are meaningful and monitoring and reacting to the competition to see who makes early moves on ratcheting up discounts and other incentives. Of course, the weather is always a concern. It’s been unseasonably warm late in November after cooler days earlier in the month.
Handling surges in transactions could pose issues, as Macy’s experienced on Black Friday. The company had to act fast to rectify a glitch delaying the processing of credit and gift cards. One source close to the company said there was no significant impact on the business. “It was a fairly minor incident.” Unfortunately, social media was all over the incident, dampening some of the high Macy’s was on after another successful Thanksgiving Day Parade and strong turnout to stores.
“E-commerce grew between 15 and 20 percent, but the more exciting news is that brick and mortar sales proved to be very resilient. Traffic was strong over Black Friday and the weekend, better than last year, or just slightly down in some cases,” said Jerry Storch, ceo of Storch Advisors and former ceo of Hudson’s Bay Co.
“I never believe you can project what’s going to happen in December based on Black Friday,” Storch added. “But it’s exciting to see such a strong Black Friday. It’s still the Super Bowl of retailing.”
Opening stores on Thanksgiving Day is something retailers debate. “If the goal is simply to get the most sale possible, it’s worth it. It’s a better deal keeping open Thursday as well as Friday. I’ve seen it work many times,” said Storch. “If the objective is broader, to make a statement about the brand or about employees, you might choose to not open on Thanksgiving. This is a topic with many dimensions.”
A more cynical point of view came from Simeon Siegel, executive director and analyst at Nomura/Instinet Equity Research. “Shopping in stores on Black Friday has become more fun than functional,” he said. “The excited few that wake up early to stand in unnecessary lines are doing it for the experience and tradition, not because that’s the only way to get a sale…It seems like in the malls, people are smiling more…and shopping less. Then in the comfort of their own space, they log on and get their shopping done.”
Starting earlier in the season with promotions, friends and family events, and extensions of Black Friday sales could be confusing consumers on what exactly is the best or “right” price for an item, Siegel said. “It used to be as simple as put in the time on Friday morning and walk out with the lowest deal. Nowadays, there are no rules. Retailers with clean inventory find themselves fighting against limitless on and offline retailers, with inventory just as clean.”
Mike Zuccaro, assistant vice president and analyst at Moody’s Investors Service, tracks mostly vendors such as Nike, Under Armour, Ralph Lauren, Hanesbrands and PVH, along with Men’s Wearhouse. He said Thursday evening started strong, but had cooled off by 8 or 9 p.m., Black Friday was busier and Saturday morning was quiet at the malls. He believes many consumers visited stores to browse, see what they like and will buy online at home.
He said inventories seem in good shape, with less inventory in the stores, and that many retailers are trying to create the impression of product scarcity to encourage earlier shopping. At apparel specialty stores, “The discounts are not as high as last year. That could be good for inventory levels and margins,” the analyst said.
Charlie O’Shea, who heads the retail team at Moody’s, saw lines at Best Buy, Kohl’s, Old Navy, Wal-Mart and Target over the weekend. Shoppers at Kohl’s angled towards apparel; those at Wal-Mart seemed inclined toward electronics and some apparel doorbusters. “I don’t see any reason for a negative view for the [holiday sales] weekend,” O’Shea said.
Holiday 2017 Trends
- Double-digit online sales; increasing popularity of mobile shopping.
- Americans show greater propensity to get out and hang out at malls.
- Coats, cold weather accessories, sweaters, jewelry, sneakers, boots, ath-leisure, home decor, cookware, candles, small electronics, 4K TVs, Echo and Alexa digital assistant devices, Apple Watch Series 3, among bestsellers.
- Retailers broaden merchandise offerings and prices to attract more customers.
- Amazon, T.J. Maxx, Home Goods, Sephora, Ulta, Old Navy, Wal-Mart, Best Buy, Williams Sonoma among best retail performers.
- Black Friday deals emerge two weeks early, softening spikes on key days.